Open letter from EDHEC to French Gov’t says Tobin tax ‘inadvisable

EDHEC – Risk Institute, part of the EDHEC Business School, has sent an open letter to the French prime minister, questioning moves to introduce a financial transaction tax.

The letter’s position is based on research by Raman Uppal, professor of Finance at EDHEC Business School.

This research suggest that such a tax would drive away liquidity from markets, that transactions taxes generally fail to curb volatility – a key argument put forward by those in favour of a Tobin tax – and that there are considerable practical barriers to introducing such a tax, such as deciding what the prevailing rate should be.

“And, from the point of view of speculators, unless all major financial centres introduced it, the Tobin tax would appear easy to circumvent by routing transactions through countries where the tax is not imposed,” the research concludes.